FY2019 Interim results presentation ADCORP IS A WORKPLACE - PowerPoint PPT Presentation

EXPLORE OUR WORLD Established 1975 I Listed JSE limited 1987 ADCORP IS A WORKPLACE SOLUTIONS COMPANY Presented by Innocent Dutiro – Chief Executive Officer Cheryl‐Jane “CJ” Kujenga – Chief Financial Officer FY2019 Interim results presentation ADCORP IS A WORKPLACE SOLUTIONS COMPANY 1

FORWARD LOOKING STATEMENTS The statements contained herein may contain certain forward‐looking statements relating to the Group that are based on the beliefs of the Group’s management as well as assumptions made by and information currently available to the Group’s management. These forward‐looking statements are, by their nature, subject to significant risks and uncertainties. These forward‐looking statements, include without limitation, statements relating to the Group’s business prospects, future developments, trends and conditions in the industry and geographical markets In which the Group operates, its strategies, plans, objectives and goals, its ability to control costs, statements relating to operations, margins, overall market trends, risk management and exchange rates. Forward‐looking statements are provided to allow potential investors the opportunity to understand management’s beliefs and opinions in respect of the future so that they may use such beliefs and opinions as one factor in evaluating an investment. Although forward‐looking statements contained in this presentation are based upon what management of the Company believes are reasonable assumptions, there can be no assurance that forward‐looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward‐looking statements apply only as of the date on which they are made, and Adcorp undertakes no obligation to update forward‐looking statements if circumstances or management’s estimates or opinions should change. The reader is cautioned not to place undue reliance on forward‐looking statements. 15 October 2018 2 2

Agenda Business Financial Strategic Conclusion context results direction 3

Business context Innocent Dutiro Chief Executive Officer 4

Introduction Half‐year results reflect Period under review Parts of our business face What you will hear today: headwinds therefore driving early‐stage positive marked by a difficult Detail on the business  a case for a strategy reset outcomes of the work trading environment performance for the half‐ year ended 31 August 2018 performed by the leadership  Overview of the changes in the team over the past year to South African regulatory stabilise the Group in framework and what this preparation for a strategic means for our business transformation The Adcorp business going  forward… 5 5

Salient features Group revenue for the Australia revenue Underlying EBITDA for Net profit from continuing year increased by 3% increased by 11% the period increased by operations of R99 million to R8 billion compared to R7.7 in constant currency terms 33% to R231 million (2017: Loss of R36 million) billion in August 2017 Earnings per share 90,2 cents Cash generated by Gearing improved Group operating costs (2017: Loss per share operations R358 million to 35% from 61% due to reduced by 16% of 120,7 cents) (2017: R122 million) change in net debt from to R896 million R1.3 billion to R650 million 6 6

South Africa macroeconomic and business environment presents unique labour market challenges Employers are largely looking for Ongoing trend of flexibility in their business cost structures retrenchments given slow hence a decline in vacancies economic growth, increased cost pressures and increasing for permanent positions competition and increased demand for Highest demand in contract resources the age group 25 to 35 for qualified workers with experience Trends we are seeing in the Substantial MISMATCH BETWEEN SKILLS DEMAND AND SUPPLY in temporary and permanent professional services with the highest demand placement businesses ~80% of our temporary for skills being in finance and specialised employees are youth ICT and digital job categories ‐ despite the (minimum requirements high unemployment rate in South Africa many almost always a matric and of our vacancies in these areas remain basic computer skills) open for very long periods 7

Operations: South Africa INDUSTRIAL PROFESSIONAL SUPPORT TRAINING FINANCIAL SERVICES SERVICES SERVICES SERVICES SERVICES      Traditional temporary Independent contract Traditional temporary Facilitates training Affordable, pay‐as‐ W H A T W E D O employment services and permanent employment services and provides learning you‐go lifestyle in largely the resourcing solutions in the office space and development benefit solutions industrial space largely in the and nursing solutions customised for the   Functional technology sector Permanent Group’s assignee base  outsourcing business Complemented by an placements as well as external  SAP specialisation, Outsourcing of front clients project management, office support and RPO, MSP, IT training contact centres Labour Relations Act Largest supplier of IT and Labour Relations Act Our opportunity lies in Primarily an enabler to C H A L L E N G E S a n d Constitutional Court digital professionals in Constitutional Court the ability to address the our Industrial and Support O P P O R T U N I T I E S ruling and National South Africa ruling and National skills shortage , with our Services divisions Minimum Wage laws Minimum Wage laws accreditations and High demand for knowledge , and Funeral support business Increased positive specialist skills Digital disruption work with our operates in a very niche, engagement with our in office workplace stakeholders to close established market clients as we focus on the skills gap holistic workplace solutions 8

Constitutional Court outcome Highlights of the interpretation  Limited interpretation of whether there are two employers or one related to the “affected employee” only for the purposes of the LRA  The only Temporary Employment Services (TES) “affected employees” are those who earn below the Basic Conditions of Employment Act (BCEA) threshold (currently R205 433 per annum ) and who are placed for longer than three‐months  This judgement does not relate to equal treatment on remuneration and benefits as this was already dealt with in the LRA amendments effective 1 April 2015 The client is the sole employer for purposes of the LRA, however the triangular relationship between client, assignee and TES still exists 9

The sole employer for the LRA LRA Client is the sole employer Client liability arises only on breach of LRA TES is the sole employer TES is the sole employer Power of attorney to TES TES liable under agreed circumstances BCEA UIFA TES is the sole employer SDA I SDLA COIDA OHSA Client is the sole employer Pre April 2015 Less than 3 months Post 3 months 10

Our TES value proposition Recruitment Onboarding and Workforce Performance Productivity offboarding management management Industrial Payroll and benefits Learnership Skills development Cash flow management relations administration management and training and payroll 11 11

Workplace solutions models 01 Temporary Employment Services Client is the sole employer Plan A Plan D for purpose of the LRA after 02 Outcomes based solutions 3 months 03 Unbundled solutions 01: Temporary Employment Services 02: Outcomes based 03: Unbundled solutions   Managed Service Provision (MSP)  Sourcing, screening, assessment, verification TES assignees above R205K per annum   Statement of Work (SOW)  Contracting, on‐boarding, payrolling TES assignees <3 months, TES absenteeism  HRO and RPO solutions  BBBEE, skills development, employment equity and entry level   Functional outsourcing  Mobilisation, management and demobilization TES below R205K, >3 months and with  Benefits Power of Attorney  Fixed term contracts 12 12

Operations: Australia Across Australia, the industries INDUSTRIAL PROFESSIONAL with the greatest growth in SERVICES SERVICES employment opportunities were MINING, RESOURCES AND ENERGY (for the 12th consecutive month) , and farming, Job ads are 8.7% higher   Semi‐skilled workers in Independent contract animals and conservation W H A T W E D O primarily agriculture, and permanent than last year, indicative of food processing and resourcing solutions solid labour demand logistics largely in the Trends we are seeing in the technology sector  Skilled professionals  within oil and gas Complemented by a SAP Australian labour market industry focusing on specialisation, project technical disciplines management, RPO, MSP, IT training Job ads in the Healthcare and Medical sector grew, as well as in the Trades and Services C H A L L E N G E S a n d OIL AND GAS Low‐cost competitors Leading supplier of IT and and ICT sector. O P P O R T U N I T I E S seeking a share of the digital professionals in EXPLORATION industry resulting in Australia (and exploration more generally) continued margin pressure These sectors account for have also been strong this 29.2% of all available year, alongside sustained Strength of our brand and High demand for opportunities in Australia. higher commodity prices ISO ratings, sound track specialist skills record and longstanding 13 client relationships. 13